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Bay Area Faces Significant Housing, Transportation Challenges

Despite a mild slowdown, developers and investors find the Bay Area a viable market and one that will create many opportunities in the years to come. Developers, investors, designers and consultants gathered in San Francisco’s Hibernia Bank to hear panelists at Bisnow’s Office Leasing and Development event discuss the latest office trends on the West Coast and how many are adapting to the housing and transportation challenges within the Bay Area.


TMG Partners CEO and Bay Area Council chairman Michael Covarrubias (above right with Allen Matkins partner Tony Natsis) told over 350 audience members about his work on the Bay Area Council and current market trends.

"We are a product of our own success," Michael said. "We’ve seen office rents grow and demand grow. We added 600,000 new jobs since the bottom of the recession and 60,000 residential units. That is supply and demand failing."

Michael said the Bay Area will likely face some form of a recession in the future, but "most don’t think there’s going to be a crash."

He said pricing needs to adjust because "$75/SF of office is hard for a lot of companies to support."


In relation to his work on the Bay Area Council, Michael said one of the biggest issues to overcome is having so many different local governments and transportation agencies. This often makes it more difficult to get people on the same page for the betterment of all in the region.

Many of the solutions to the Bay Area’s problems, including housing and transportation, can be solved by having people willing to compromise, Michael said.

"You can’t just keep running around in your own circle thinking it’s going to work," he said.

Despite the challenges, the Bay Area Council has had many successes this year.


The council was instrumental in the passage of recent state legislation easing restrictions on accessory units, according to Michael.

“If you just did 10% of every possible accessory unit in the Bay Area, you can add 150,000 residential units,” Michael said.

The council also has been pushing for the passage of Measure RR, which would provide additional funding to update BART’s system and increase its available capacity, Michael said. The funding would also help add another tube crossing under the bay.

The council works with local companies to lobby Washington to get more transportation money to improve the region’s infrastructure, Michael said.

Panelists also discussed housing affordability and transportation challenges along with how they are finding opportunities for development and investment.


Newmark Cornish & Carey executive managing director Kyle Kovac, Lincoln Property executive SVP Western region John Herr, Brookfield Office Properties EVP Northern California and Mountain David Sternberg, Chestnut Properties principal Lee Chestnut, and ESD president and event moderator Kurt Karnatz talked about how they will continue to invest in the Bay Area and California. Entrepreneurship in the region and a plethora of tech firms make it an ideal place. Tech firms also are increasing the need for large blocks of office space.

Panelists discussed how housing and transportation remain significant issues for development and how Millennials’ preferences continue to create demand for open office space and proximity to urban cores.


Webcor president and CEO Jes Pederson, Truebeck Construction co-founder Sean Truesdale, DPR regional manager Mike Humphrey, CityLift Parking CEO Scott Gable, and AISC Northwest regional engineer and event moderator Kristy Davis discussed how technology is changing the way offices are built.

Many companies want buildings to reflect their brand through quality design and execution. This has meant developing smarter buildings with better data collection capabilities, more clear glass and mechanical systems, radiant flooring, fresh air and natural ventilation, bringing landscaping into the office and offering condensed automated parking.

On a separate panel, HOK VP director of design Daniel Herriott, regional director planning and consulting Steve Morton, senior design strategist Kerri McShea and senior workplace specialist and senior associate Julia Cooper discussed the latest workplace design trends, including how technology affects design, how to customize workplaces to best serve employees and how companies are demanding to incorporate not only social spaces, but also learning environments.


BarkerBlue CEO Gene Klein, Rossi Builders president Craig Rossi, Pankow project executive Wally Naylor, and DCI Engineers and event moderator Jeff Brink discussed how amenities will remain key within the office space. Tenants will still want flexible and collaborative workspace along with hospitality-like amenities.

Panelists discussed how just throwing in amenities for the sake of having amenities is not cost-effective and results in space that is often underused. They suggested bringing in each of the company’s departments early in the design phase to provide input on what they want in their own space. This creates better, more effective workspaces without wasting money.